An Obamacare Loss in King v. Burwell Could Cost States $721 Billion

Next month, the Supreme Court will decide whether Obamacare enrollees in states that did not set up their own exchanges will continue to have access to federal subsidies.

If the Court rules against the administration in the high-stakes case of King v. Burwell, an estimated 9.8 million people could become uninsured in states that rely on the federal exchange.

Under the Affordable Care Act, the federal government funds state Medicaid expansion fully for three years, then at 90 percent thereafter. When the law was originally passed, all states were mandated to expand their Medicaid programs.

However, a 2012 Supreme Court ruling gave states the right to opt out of the expansion. Twenty-one states have decided not to expand their programs, with many of their state lawmakers citing cost issues as the number one reason for not expanding.

If the Obama Administration loses it case, the 20 states that did not set up their own exchange or expand their Medicaid programs under the Affordable Care Act would lose an estimated $721 billion in federal funding over the next decade.

These 20 states would lose $41 billion in federal spending in 2016 for not expanding Medicaid, and another $21 billion would be lost if the federal subsidies stop flowing.

A decision against the Obama administration threatens to dismantle Obamacare in its entirety. If the Court strikes down federal subsidies, the record-low uninsured rate skyrocketing back up since many healthier people would leave the risk pool, forcing the price of premiums to soar.

Of course, should the Court strikes down the subsidies, Congress could act and amend the law's language to provide for federal tax credits to continue flowing in states using the federal exchange.